Chickens say Cheep. Cloud Providers don’t always mean Cheap.

In building a business plan I know that soft dollars (increased productivity) and cost avoidance aren’t really accepted. In building an ROI you avoid those two because they represent bad math.

I’ve worked with startups and VC funded organizations that flipped that cost structure from the Boston Consulting Group model (experience driving cost down) to the VC model of experiences increase the projected initial cost (flipping the cost model 180 degrees, going up for a time not steadily down). I’ve worked with companies that were willing to lose money (deployed printers) to enable ease for the users (law firms often do this – many more printers than needed).

The problem of course and I realize it, is its unallocated money. Cost avoidance is money spent, just somewhere else. Its IT funny money for many projects. Soft dollars are also hard to lock in because it varies. If you say deploying X product will increase productivity for workers by 10% its actually 12% for Sally and 3% for Dave based on their jobs. It may actually cause Jim to decrease his productivity for a time. It is an average increase over a user population and may actually never happen.

Cloud computing in and of itself presents an interesting problem. When you throw the blanket of cost over a cloud solution suddenly things change rapidly. The first problem is the reality of scale. If you truly take the lowest cost approach to cloud computing then you will only work with one of the four or so big cloud service providers. Cost wise they are the least today.

Except they may not be. Cost is interesting in that there are things not included in the cost of a solution that are critical. For example if your average helpdesk call is 20 minutes and in moving to a new cloud solution, your call time goes to 40 minutes you have effectively doubled your HD cost. No matter what that will result in a soft dollar productivity loss, a frustration level for users (they begin to stop calling) and effectively it costs more. A lot more.

So the other side of the cost equation pops up, the benefits. My great-grandfather was a finish carpenter at the Pullman Railroad Car company of Aurora Illinois. His job was to add the final touches to the inside of commuter rail cars so that they looked nice. To add wood and other trimming to railroad sleeper cars so they looked nice. Why? Because it impacted the quality of the car. It cost more to add finish, it took more time but it offered a quality experience. So Pullman did that.

Some smaller CSP’s actually offer a better user and customer experience than the big boys can. It’s a fact of business that a focused organization offers a better long term solution by covering the hidden costs of cloud computing.  So you don’t end up with lost productivity. Effectively lost productivity is the impact zone for all organizations. Yes its soft dollars, but every time you add a minute to your average helpdesk call you add an hour of lost productivity across 60 callers. You add stress and frustration to the workforce that may ultimately result in negative attrition (my job is stressful, I am looking for a different job).

It’s not always as simple as buying the cheapest version.

.doc

Cheap, is best heard from a chick not a CSP!